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09.11.202109:27 Forex Analysis & Reviews: US stock market risks entering correction

S&P 500

The US market is trading at annual highs.

Major US indices kicked off the trading week with sligh gains: the Dow Jones Industrial Average added 0.2%, while the NASDAQ and S&P 500 advanced by 0.1%.

Asian markets. Japan's Nikkei 225 stock market index fell markedly by 0.7%. China's benchmark Shanghai Composite Index remained almost unchanged, rising by 0.1%.

Commodity market. Brent crude oil is trading within a range of 82-85 dollars per barrel ($83.50 on Tuesday) and has not yet decided on its further direction.

COVID-19. The number of new cases in the world increased by 380,000. On the first working day, the United States reported 58,000 new infections. Russia posted another daily record of confirmed coronavirus cases, an increase of 39,000. Nevertheless, by the end of the second year of the COVID-19 pandemic, the coronavirus seems to be waning in the world. However, the situation in Eastern Europe and Germany remains difficult.

S&P 500: 4,701. Trading range: 4,660 - 4,720. The main US index managed to overcome the level of 4,700. However, all professional market participants understand that the risk of a strong downward correction in the market is very high.

Two Fed officials - Fed Vice Chair Richard Clarida and St Louis Fed President James Bullard - commented on a possible interest rate hike in 2022. Clarida said that the economic conditions necessary for the central bank to raise interest rates could be met by the end of 2022. Bullard said he expects the Fed to raise interest rates twice in 2022, immediately it wraps up its bond-buying taper mid-year. Notably, the regulator will start reducing its $120bn monthly bond purchases this month.

Tesla stock fell by 4.8% yesterday after its major shareholder and CEO Elon Musk announced that he would sell 10% of his shares in the electric-powered vehicle company's stock for $21 billion. Tesla stock advanced considerably in the previous few weeks, and the company's market capitalization exceeded $1 trillion. However, Tesla Inc.'s stock valuation is "overheated". Thus, it is extremely risky to invest in its shares after yesterday's drop.

The United States has eased its coronavirus travel restrictions for the first time since the start of the pandemic, primarily for EU residents. Now foreign travellers will be allowed to fly into the US if they are fully vaccinated or undergo testing. Vaccines must be authorized by US regulators.

USDX: 93.90. Trading range: 93.60 - 94.20. The US dollar's rally fizzled and the pair started to trade within a range. New data on inflation could have a significant impact on the dynamics of the quotes, depending on which direction inflation in the United States changes.

USD/CAD: 1.2440. Trading range: 1.2400 - 1.2500. The pair has stalled in a narrow range and is currently waiting for impulses from the US dollar or the oil market.

Conclusion. Market participants are awaiting the US inflation report for October to be released today. The likelihood of a strong downward correction remains high.

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Jozef Kovach,
Analytical expert of InstaSpot
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